Markets slide on profit booking

Fri, 14 May 01:30 pm

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Profit booking in heavy weights facilitated the slid of markets into the red zone during the last two hours of trade. Investors remained largely cautious as stocks from the defensive sectors i.e. FMCG and pharma led the pack of gainers. Heavy selling was seen in stocks from the realty and metals space.

BSE-Sensex is trading down by 79 points while NSE-Nifty is trading 29 points below the dotted line. BSE-Midcap index is trading lower by 0.4% while the BSE-Smallcap index is trading 0.3% below yesterday's closing. The rupee is trading at 45.09 to the US dollar.

As per a financial daily, Japan has agreed in principle to treat Indian pharmaceutical companies at par with Japanese companies on approval and registration in Japan. As per the proposed India-Japan Comprehensive Economic Partnership Agreement (CEPA), Indian pharmaceutical firms will be treated just like their Japanese counterparts and will not face any discrimination. This would be legally binding. While Japan is the world's second largest pharma market and is worth around US$ 60 bn, the country has stringent registration norms. This makes it difficult for any pharma company to enter the Japanese market. However, with this agreement in place it would be a big boost for companies like Ranbaxy, Lupin and Zydus Cadila who have established a presence in the Japanese pharma market.

IDBI Bank announced its fourth quarter and full year FY10 results recently. During the year, the bank reported a 32% YoY increase in interest income and a slower 26.2% YoY increase in interest expenses. This was despite a low capital adequacy ratio, which stood at 11.3% at the end of FY10. The advances growth during the year stood at 34% YoY. IDBI's net interest income grew by 83% YoY for the full year. In the process, the bank's net interest margins (NIMs) expanded by 0.3% YoY to 1.3%. At the profit before tax level, the bank's profits were higher by 6% YoY. This is mainly due to a higher 328.9% YoY increase in provisions and contingencies. However, its cost to income ratio shrank from 49% in FY09 to 40% in FY10. IDBI Bank's profits for the full year however, increased by 20% YoY on account of a lower tax outgo. Net profit margins dropped by 0.6% YoY in FY10 to 6.8% due to higher provisioning costs. A key factor that will play a role in the banks future growth is its capital adequacy ratio. Unless the bank goes in for some measure, it is quite possible that it would not be able to sustain such high levels of advances.